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Fueled by new institutional capital of $36 million, a Houston-based Internet bank has multiplied from 12 employees to a staff of 100 since Thanksgiving.

CompuBank, the first nationally chartered Internet bank, in February announced the equity injection from a group of high-profile companies.

This first institutional round of financing was led by an arm of Softbank Corp., a Japanese player with stakes in more than 100 Internet companies, including bellwethers Cisco Systems, Yahoo! and Microsoft. Heavy hitters Goldman Sachs, GE Financial Assurance and Marsh & McLennan Capital round out the investment group that added $36 million and a strong dose of outside credibility to CompuBank.

"It was quite a validation of a project that's several years old," says CompuBank Executive Vice President Jonathan Lack.

As money pours into Internet companies of all stripes, the new layer of CompuBank financing dwarfs the $6 million in capital used to launch the bank in 1997. The online bank is the brainchild of longtime Houston banker Frank Goldberg, its chairman and CEO.

In 90 days since late November, fresh capital enabled CompuBank to boost head count from 12 to 100, Lack notes. About 90 percent of the staff is in Houston, with the remainder in the San Francisco Bay area.

The bolstered equity also will fuel marketing efforts for the online bank.

"I want more than a million customers by 2005," Lack says.

Since CompuBank is privately held, Lack only will say it has thousands of customers.

Of course, CompuBank would need to open up its books if it opts for an initial public offering, which Lack says is a consideration. The addition of top-tier institutional investors and Wall Street's insatiable appetite for Internet stocks suggest an IPO is likely. And new CompuBank investor Goldman Sachs, a top investment bank and securities firm, wields valuable expertise in taking companies public.

Within the next 12 months, CompuBank will probably pursue another round of private financing or file for an IPO, according to Lack.

As a regulated financial institution, CompuBank must maintain minimum regulatory capital levels, which ratchet up as it grows. And as an Internet company, CompuBank must commit substantial dollars to building its brand.

"You don't grow without promoting yourself," Lack notes.

CompuBank received a valuable third-party endorsement in 1999, when The Wall Street Journal online publication SmartMoney.com named it the top Internet bank. Among other attributes, CompuBank won praise for its lack of fees. And although it doesn't make loans, the Houston company still beat the virtual competition in products and services.

In the SmartMoney.com ratings, CompuBank ranked just ahead of bricks-and-clicks behemoth Citibank.

Bank notes

A local bricks-and-mortar bank is raising capital of its own this month.

Republic National Bank, formed in 1998, is pursuing a private secondary offering of $7 million.

In just 15 months, the closely held independent has built a four-branch local network with total assets of $115 million.

"You've got to have so much capital to support your asset level," says Republic Chairman C.P. "Chip" Bryan. "This will allow us to grow past the $200 million mark."

The planned secondary offering follows its initial public offering of $12 million among 320 local shareholders in October 1998. Republic is on track to raise $7 million in fresh capital from existing and new investors by the end of this month.

Armed with the bigger war chest, Republic likely will add a fifth location by early next year, probably on Highway 290 outside Loop 610, according to Bryan.

In February the bank opened its only Memorial-area branch in Katy Freeway storefront offices vacated by Sterling Bank.

"We have a number of shareholders in that marketplace," Bryan notes.

The new west Houston branch sits within a mile of four larger rivals, including a relocated Sterling operation near Memorial City Mall. Bryan spent 20 years at Sterling, where he was vice chairman as recently as the mid-1990s.

Sterling and Republic share a focus on making loans to owner-operated businesses. Toting a loan portfolio over $80 million, Republic caters to companies with borrowing needs under $4 million.

? Bank United Corp. this month could launch a program to repurchase its battered shares, says an equity analyst who covers the Houston-based holding company of Bank United of Texas.

A stock buyback by the financial institution would complement recent insider purchases of its shares. In December and early January, Bank United officers and directors combined to pay over $1 million for more than 47,000 shares.

Bank U lately changed hands at $27, down nearly 40 percent from a 52-week high of $44. In January it sagged to about $22, within pennies of an all-time low. The company launched an IPO for its common stock in July 1996.

Bank United shares have sold off as investors fret about possible ill effects of rising interest rates, including higher mortgage rates.

Jim Greer, Houston Business

Journal banking, finance and securities reporter, can be reached by e-mail at jgreer@amcity.com.

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